TheArtLawReviewEdition1-1

United States

ii Nazi-looted art and cultural property

Nazi-looted art

In the United States, civil claims for the return of art misappropriated by the Nazis are determined by the courts or otherwise resolved through alternative dispute resolution (ADR). Unlike in many European countries, there is no restitution commission or committee that has been established by the US government for evaluating claims to artworks that were lost during the Nazi era. In part, this is due to the federal government’s limited involvement in the operation of museums; the vast majority of US museums are privately owned or are owned by state and municipal authorities. Thus, restitution claims, whether against an individual or a museum, are decided under state law, which at times can vary widely from state to state.

In 1998, the US government convened the Washington Conference on Holocaust-Era Assets, held in Washington, DC, to consider the issues raised by the continuing discovery of Nazi-looted assets, including artworks. The Conference promulgated the Washington Conference Principles on Nazi-Confiscated Art (the Washington Principles), adopted by 44 nations. The Washington Principles invited Holocaust victims and their heirs to assert claims for the recovery of artworks and encouraged affected nations to develop processes to implement the principles and address disputes as to the artworks to achieve a ‘just and fair’ solution.22 At the subsequent Prague Holocaust Era Assets Conference in 2009, 46 nations, including the US, signed the Terezin Declaration on Holocaust Era Assets and Related Issues (the Terezin Declaration), which reaffirmed the core tenet of the Washington Principles that it is essential to ‘facilitate just and fair solutions with regard to Nazi-confiscated and looted art . . .’23 The participating states urged, through the declaration, that all parties, including public and private institutions, adhere to its principles.

In 2019, an appellate court in New York affirmed a decision ordering two pieces of Nazi-looted art to be returned to the heirs of their original Jewish owner, Fritz Grunbaum, a prominent cabaret performer in 1930s Vienna and a prolific collector of art.24 The lower court, in applying the Holocaust Expropriated Art Recovery (HEAR) Act (discussed in Section III.iii) suggested that courts are obligated to apply the Holocaust policy of the US. The court ruled that the case must be viewed in light of the HEAR Act, and in so doing, underscored that one of the two purposes of the HEAR Act, as noted in the legislative history, was ‘to ensure that laws governing claims to Nazi-confiscated art and other property further United States policy as set forth in the Washington Conference Principles . . . and the Terezin Declaration’,25 and that, therefore, the HEAR Act ‘compels us to help return Nazi looted art to its heirs . . .’26 On appeal, the court affirmed this point, emphasising that Congress, in relevant part, enacted the HEAR Act ‘in an effort to “ensure that laws governing claims to Nazi-confiscated art and other property further United States policy”. . .’27

But this approach has not been uniformly applied by courts in the US. In a recent opinion issued by the United States Court of Appeals for the Ninth Circuit, Cassirer v.

22www.state.gov/washington-conference-principles-on-nazi-confiscated-art/.

23https://2009-2017.state.gov/p/eur/rls/or/126162.htm.

24Reif v. Nagy, 175 A.D.3d 107 (1st Dep’t 2019).

25Reif v. Nagy, 61 Misc. 3d 319, 323 (Sup. Ct. Cnty. 2018).

26id., at 324.

27Reif v. Nagy, 175 A.D.3d 107, 131 (1st Dep’t 2019).

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Thyssen-Bornemisza Collection,28 the Ninth Circuit noted that courts ‘cannot order compliance with the Washington Principles or the Terezin Declaration’.29 Thus, other jurisdictions in the US consider both the Washington Principles and the Terezin Declaration to be non-binding international agreements.

Another recent development concerning art misappropriated during the Nazi era involves the Foreign Sovereign Immunities Act (FSIA).30 Under US law, foreign states and their agencies and instrumentalities are immune from jurisdiction in a US court unless certain exceptions apply, which are set forth in the FSIA. Since its enactment in 1976, these exceptions have been used as a basis for jurisdiction over foreign sovereigns being sued in the United States.

Of the enumerated exceptions, the ‘expropriation exception’ is most utilised in Nazi-era restitution cases. This exception provides that, where property has been taken in violation of international law, and either that property or any property exchanged for it is present in the US in connection with a commercial activity carried on in the US by the foreign state, or that property, or any property exchanged for it, is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the US, then that state will not be immune from suit where the rights to such property are at issue.31

Currently, there are two cases concerning the interpretation of the FSIA that are set to be heard by the US Supreme Court. The first, Federal Republic of Germany v. Philipp,32 involves a restitution claim by the heirs to a collection of medieval artworks known as the Guelph Treasure, which was sold in 1935 by a consortium of Jewish art dealers to the Nazi-controlled state of Prussia, allegedly as agents of Hermann Goering. The Guelph Treasure is currently in the possession of the Prussian Cultural Heritage Foundation, a German agency. In its petition for certiorari, Germany presented two questions to the Supreme Court: (1) whether the expropriation exception ‘provides jurisdiction over claims that a foreign sovereign has violated international human-rights law when taking property from its own national within its own borders, even though such claims do not implicate the established international law governing states’ responsibility for takings of property’; and (2) whether ‘the doctrine of international comity is unavailable in cases against foreign sovereigns, even in cases of considerable historical and political significance to the foreign sovereign, and even where the foreign nation has a domestic frame-work for addressing the claims’.33

This petition sets forth issues of exceptional importance to Nazi-looted art cases brought in the US against foreign sovereigns and their agencies or instrumentalities. In particular, the

28No. 19-55616 (9th Cir. 17 August 2020). At issue in the case was a painting by Camille Pissarro, which was stolen from the claimants’ ancestors by the Nazi regime in 1939. The Ninth Circuit affirmed that the possessor acquired title to the painting, which in that case was decided ‘pursuant to Spain’s law of prescriptive acquisition. . .’ Cassirer v. Thyssen-Bornemisza Collection Found., No. 19-55616, 2020 WL 4746626, at *1 (9th Cir. 17 August 2020).

29Cassirer v. Thyssen-Bornemisza Collection Found., No. 19-55616, 2020 WL 4746626, at *3 n.3 (9th Cir. 17 August 2020).

3028 U.S.C. §§ 1605 (a)–(e).

3128 U.S.C. § 1605(a)(3).

32Supreme Court Docket No. 19-351, available at www.supremecourt.gov/docket/docketfiles/html/ public/19-351.html.

33Petition for Writ of Certiorari, Fed. Republic of Germany v. Philipp, Supreme Court Docket No. 19-351, available at www.supremecourt.gov/docket/docketfiles/html/public/19-351.html.

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parties dispute whether property taken by a foreign state from its own nationals during the course of genocide, in this case the Holocaust, constitutes a ‘taking’ for purposes of the FSIA. Germany argues that a violation of the ‘international law of takings’ only addresses when a state has taken property from another state’s national. Respondents, on the other hand, argue that any ‘genocidal thefts’ violate international law.

In the second case, Republic of Hungary v. Simon,34 survivors of the Holocaust in Hungary filed suit against the Republic of Hungary and Magyar Államvasutak Zrt, Hungary’s state-owned railway company, seeking compensation for the seizure of property that was allegedly taken as part of the Hungarian government’s genocidal campaign. Before the Supreme Court is the question of whether the doctrine of international comity may apply where jurisdiction otherwise exists under the FSIA. Both cases were argued on 7 December 2020.

Cultural property

The US government combats trade in illicit antiquities using a variety of legal tools. The National Stolen Property Act (NSPA), which may also be employed in Nazi-looted art matters, is a statute that allows the government to both criminally prosecute those who knowingly possess, sell, receive or transport stolen goods valued at more than US$5,000 that have either crossed a state or United States boundary line or moved in interstate or foreign commerce, and to render such objects subject to forfeiture proceedings. To fall under the purview of the NSPA, an object must qualify as ‘stolen’. As established by US jurisprudence, antiquities acquired in contravention of a foreign nation’s valid patrimony law are considered stolen for purposes of the NSPA.35

One type of forfeiture proceeding that is commonly used in the context of looted cultural property is a civil action brought by the government pursuant to 19 USC Section 1595a. Section 1595a is a customs statute that authorises the forfeiture of any merchandise that is ‘stolen, smuggled, or clandestinely imported or introduced’ or attempted to be introduced into the United States ‘contrary to law’.36 A violation of the NSPA often serves as the basis of the ‘contrary to law’ prong of the law.

A recent forfeiture claim illustrates the application of this statute. On 18 May 2020, the US government filed a complaint for the civil forfeiture of the Gilgamesh Dream Tablet, which was purchased by Hobby Lobby Stores, Inc (Hobby Lobby) for donation to or display at the Museum of the Bible.37 The government’s complaint states that property is considered ‘stolen’ pursuant to 19 USC Section 1595a and the NSPA ‘if it was taken without official authorisation from a foreign country whose laws establish state ownership of such cultural

34Supreme Court Docket No. 18-1447, available at www.supremecourt.gov/docket/docketfiles/html/ public/18-1447.html.

35See, e.g., United States v. Schultz, 333 F.3d 393, 410 (2d Cir. 2003) (holding that ‘the NSPA applies to property that is stolen in violation of a foreign patrimony law’).

3619 U.S.C. § 1595a(c)(1).

37United States v. One Cuneiform Tablet Known As The ‘Gilgamesh Dream Tablet’, No. 20-02222 (E.D.N.Y. 18 May 2020).

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property’.38 In the case of the Tablet, it was alleged to have been removed from Iraq in contravention of the country’s patrimony law; therefore, it would constitute stolen property subject to civil forfeiture.39

iii Limitation periods

In the United States, statutes of limitations often vary in content and application from state to state, and differ depending on the type of claim being pursued. For example, if a buyer acquires an artwork that is subsequently determined to be inauthentic, the buyer may bring an action for fraud against the seller. In New York, the statute of limitations governing fraud claims is either six years from the date of the fraud (i.e., the date of purchase of the artwork) or two years from the date the fraud was discovered, or with reasonable diligence, could have been discovered.40 In contrast, other states apply different limitation periods. For instance, under Florida law, a claim for fraud must be commenced within four years.41 Accrual for the claim begins ‘from the time the facts giving rise to the cause of action were discovered or should have been discovered with the exercise of due diligence’; however, the action ‘must be begun within 12 years after the date of the commission of the alleged fraud, regardless of the date the fraud was or should have been discovered’.42

Where the cause of action involves claims for replevin or conversion of art, accrual may depend on whether the possessor holds the art in good faith. In some states, including New York, a ‘demand and refusal’ rule applies, under which the three-year limitation period does not begin to run until the owner makes a demand for the return of the property and the possessor refuses. The majority of states, however, follow a ‘discovery rule’. In these states, the limitation period, which differs depending on the state, begins to run when the plaintiff discovers or, after the exercise of reasonable diligence, should have discovered the whereabouts of the artwork.

For art recovery cases involving art lost during the Nazi era, a special statute of limitations applies – the HEAR Act of 2016.43 Under the terms of the Act, which establishes a uniform federal statute of limitations, the limitation period starts to run upon the actual discovery by the claimant of the identity and location of the artwork or other property and the claimant’s possessory interest in that property. In the case of a possible misidentification, the Act provides that discovery is deemed to occur ‘on the date on which there are facts sufficient to form a substantial basis to believe that the artwork or other property is the artwork or other property that was lost’.44 For those who had claims already pending in court, the law deemed such claimants to have had the requisite knowledge as of the date of

38id.

39One day after the government’s filing, Hobby Lobby initiated a separate civil claim against Christie’s and the unknown consignor of the tablet to Christie’s. See Hobby Lobby Stores, Inc. v. Christie’s Inc. and John Doe #1, No. 20-CV-2239 (E.D.N.Y. 19 May 2020). Thereafter, it was reported in August 2020 that Iraq entered negotiations with Hobby Lobby concerning the return to Iraq of thousands of antiquities purchased for the Museum of the Bible. See www.npr.org/2020/08/20/886540260/in-iraq-authorities- continue-to-fight-uphill-battle-against-antiquities-plunder. This agreement, if reached, may ultimately include return of the Tablet.

40See N.Y. C.P.L.R. § 213(1), § 213(8), § 203(g).

41See Florida Statutes § 95.11(3)(j).

42id., § 95.031(2)(a)

43Pub. L. No. 114-308 (2016).

44id., at Section 5(b).

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enactment of the statute, unless the claimant was otherwise barred under an exception to the Act.45 The law is set to expire on 1 January 2027, although it will still apply to claims already pending at that time.

In addition to state and federal statutes of limitations, the equitable doctrine of laches may also bar otherwise timely art claims. To establish the defence, a possessor must show that the claimant unreasonably delayed in bringing the action to the prejudice of the possessor. A court may also weigh the relative equities between the parties in determining whether to apply the defence.

iv Alternative dispute resolution

In the United States, there are no specialised ADR organisations dealing specifically in art matters. Moreover, as a general matter, art disputes that are resolved by ADR are almost always subject to confidentiality provisions; indeed, confidentiality is one of the top reasons for parties to avoid litigation. Consequently, the prevalence of ADR in resolving art disputes in the US is difficult to quantify.

IV FAKES, FORGERIES AND AUTHENTICATION

In August 2019, after more than eight years of numerous legal disputes, the final lawsuit arising from one of the most well-known art forgery scandals in the US came to a close. The case, Martin Hilti Family Trust v. Knoedler Gallery, LLC et al, which ultimately settled, involved a fake Mark Rothko painting that was sold for US$5.5 million through the now-closed Knoedler Gallery in New York.46 In 2011, after 165 years of operation, the Knoedler Gallery closed following the discovery that it had sold tens of millions of dollars’ worth of paintings

– including other supposed Rothko paintings, along with works purportedly by Jackson Pollock, Robert Motherwell and others – that turned out to be forgeries. In the civil litigations that followed, plaintiffs pursued various legal claims, including, inter alia, causes of action for fraud, mistake and breach of warranty.

As in the Knoedler Gallery litigations, where an artwork is discovered to be a fake, a forgery or otherwise inauthentic, claims based on fraud, mutual or unilateral mistake and breach of express or implied warranties are common. Under certain circumstances, an action for breach of warranty may be particularly useful because the buyer need not prove any fault by the seller. To establish a breach of a warranty, which can be either express or implied under the UCC,47 the buyer need only prove that a warranty existed, the goods failed to conform to that warranty and he or she suffered a loss as a result. A successful breach of warranty claim allows a buyer to recover the difference between the value of the defective artwork and the value of the artwork as it was warranted (i.e., an authentic artwork).48

45The exception limits the application of the Act from applying to ‘any civil claim or cause of action barred on the day before the date of enactment. . . by a Federal or State statute of limitations if – (1) the claimant or a predecessor-in-interest of the claimant had knowledge of the elements set forth in subsection (a) on or after January 1, 1999; and (2) not less than 6 years have passed from the date such claimant or predecessor- in-interest acquired such knowledge and during which time the civil claim or cause of action was not barred by a Federal or State statute of limitation’. id., at Section 5(e).

46See Docket No. 13-cv-00657-PGG-HBP (S.D.N.Y.).

47See, generally, U.C.C. §§ 2-313-16.

48U.C.C. § 2-714(2).

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Pursuant to the UCC, an express warranty may arise from: (1) ‘[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain’, and (2) ‘[a]ny description of the goods which is made part of the basis of the bargain’.49 An express warranty may also arise from representations made in materials such as advertisements or catalogues, or from a seller’s oral statements to the buyer.

A buyer may also bring an action against a gallery, art dealer, auction house or other art merchant for breach of an implied warranty of merchantability.50 For art to be merchantable, it must, in relevant part, (1) be able to ‘pass without objection in the trade under the contract description’; (2) be ‘fit for the ordinary purposes’ for which it is sold; and (3) ‘conform’ to the ‘affirmations of fact’ made in the sale catalogue or the bill of sale.51 A buyer may be able to claim a breach of implied warranty of merchantability if he or she is able to demonstrate, for example, that (1) a work of art does not conform to its description; or (2) his or her investment or aesthetic purposes are compromised because the work is a forgery.

Some states have enacted laws specifically addressing art warranties. Under NY Arts and Cultural Affairs Law Section 13.01–13.21, an art merchant that sells an artwork to a non-merchant buyer creates an express warranty if, in its written description of the artwork, the merchant identifies the artwork with a particular author or authorship. According to this Law, whenever an art merchant furnishes a certificate of authenticity to a non-merchant purchaser, authenticity is presumed to be a basis of the bargain and creates an express warranty. The art merchant can temper this warranty by making the attribution clear. The dealer can say the art is by the artist, ‘attributed to’ the artist or from the ‘school of’ the artist.52 To negate an express warranty of authenticity under this Law, a disclaimer must be conspicuously written and contained in a separate provision from the language creating the warranty. Words of ‘general disclaimer’ are not considered sufficient to ‘negate or limit an express warranty’. To protect the buyer, however, a disclaimer of express warranty will be ineffectual if it is later shown that the work of art was counterfeit or if ‘the information provided is proved to be, as of the date of sale or exchange, false, mistaken or erroneous’.53

VART TRANSACTIONS

iPrivate sales and auctions

The UCC generally governs most issues related to the sale of artwork. This includes not only express and implied warranties, but also warranty of title and against infringement,54 consignments and other requirements for agreements. Some provisions of the UCC apply only to auctions.55

Although the coronavirus pandemic, which began at the start of 2020, has caused a dip in art sales generally, it has caused a significant increase in online sales. Online-only auction sales by Christie’s, Sotheby’s and Phillips generated US$370 million in the first half of 2020, five times higher than the same period in 2019. For example, Sotheby’s reports a 131 per cent

49U.C.C. § 2-313.

50U.C.C. § 2-314.

51U.C.C. § 2-314(2).

52N.Y. Arts & Cult. Affairs Law § 13.01.

53id.

54U.C.C. § 2-312.

55See U.C.C. § 2-328.

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increase in the number of lots sold online in the first half of the year (January to May 2020).56 Galleries have also increased their online sales − online shares rose from 10 per cent of total sales in 2019 to 37 per cent in the first half of 2020.57 In-person auctions, art fairs and other modes of traditional sale have been postponed or cancelled.

In many cases, physical vetting of artworks is not possible, with some purchasers forced to rely on digital vetting (e.g., digital photos or online viewing rooms to purchase artworks ‘as is’). Accordingly, there are risks when purchasing artwork online. While the larger auction houses (e.g., Christie’s and Sotheby’s) tend to offer more information about the items they sell and more protection if there is an issue with an artwork after purchase than online-only platforms, the artworks are purchased ‘as is’. These auction houses will most certainly have possession of the artwork being sold; other online-only platforms may not. If the purchaser is not able to view the work in person beforehand, they are forced to rely more heavily on condition reports and trust that the auction houses or sellers have done their due diligence.

Although online sales have increased, sales have decreased across the board and some galleries have remained closed or are in dire straits. For example, galleries in the first half of 2020 reported that the value of their sales fell by 36 per cent on average compared to the same period in 2019, with the majority of galleries believing sales will continue to decrease.58 Bankruptcies are sure to become more common.

When a gallery files for bankruptcy, under the UCC and bankruptcy law, repaying creditors may supersede returning the consigned artwork to its owner if the work is not properly protected. Most consignments are governed by UCC Article 9.59 Under this Article, consignors can protect their artworks by perfecting their security interest in the artwork and filing a UCC-1 financing statement – a legal notice filed by a creditor as a way to publicly declare its rights to seize property of a debtor, in this case the gallery, which may have defaulted on its loans. Many states also have enacted legislation to protect artists (although not collectors) who consign their works, and they receive priority of ownership ahead of a creditor’s claim to it as an asset of the gallery.

ii Art loans

There are many reasons a private collector would want to loan a work of art to a museum. Museum loans present a philanthropic opportunity for lenders to share their works with the general public in a controlled and safe environment. Additionally, the borrowing museum may provide new scholarly information about the works. Inclusion in a museum exhibition could also bolster an artwork’s provenance, potentially increasing the work’s monetary value through public exposure. Many museums, however, frown upon the sale of a loaned work shortly after an exhibition. These museums often include a provision in their loan agreements that prohibits a sale within a specified period after the close of the exhibition. These periods can range from as short as three months to as long as two years after the conclusion of the loan.

56Hiscox online art trade report 2020, available at www.hiscox.co.uk/sites/uk/files/documents/2020-07/ Hiscox_online_art_trade_report_2020-new.pdf.

57Clare McAndrew, footnote 3.

58id.

59U.C.C. § 2-326 or bailment law may also apply.

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Before loaning a work of art, a potential lender must first consider whether it is appropriate to lend a particular work, taking into account safety and damage concerns. Once these issues are addressed, the potential lender must then determine what should be included in the loan agreement once a work is approved for exhibition.

Lenders should also consider if the loan creates a use tax liability. This tax applies on account of a property’s use within a taxing jurisdiction (in contrast to the sales tax, which applies on account of a property’s sale within a taxing jurisdiction). For example, if a painting is purchased in state A, and five years later is loaned to a museum in state B, the use of that painting in state B (i.e., its exhibition at a state B museum) may subject it to a use tax. Generally, sales tax paid on a property will be credited against the owner’s use tax liabilities, if any. The challenge, therefore, is mainly for works that were protected from sales tax, whether on account of happenstance or creative tax planning. The circumstances that create a sales tax exemption or discount tend to vary from state to state, and a work that has not been subject to sales tax might become subject to use tax on account of a loan to a museum situated in an inhospitable taxing jurisdiction. In those circumstances, a lender may face a use tax that is prohibitively expensive.

Another preliminary issue for the lender to consider is whether there are any provenance questions regarding the artwork. If there are competing claims to a work, these may open the artwork to the risk of judicial seizure. In the United States, the Immunity from Judicial Seizure Statute60 protects certain objects from seizure by the US government. Pursuant to the federal statute, any not-for-profit museum, cultural or educational institution may apply to the US Department of State for a determination that art to be loaned from abroad for exhibition is culturally significant and that the exhibition is in the national interest. If the application is granted, the art is immunised from judicial seizure by the federal government.

Unlike with individual collectors, where the lender is a cultural institution owned by a foreign state there are added issues to consider. Under the FSIA, a foreign state and its agencies and instrumentalities are immune from suit in US courts unless certain exceptions apply.61 One of these exceptions is where rights in property taken in violation of international law are in issue. The Foreign Cultural Exchange Jurisdictional Immunity Clarification Act of 2016 added Section 1605(h) to the FSIA, which made clear that activities of a foreign state associated with the temporary exhibition or display of art determined to be immune from seizure shall not be considered ‘commercial activity’ within the meaning of the FSIA’s expropriation exception,62 which deals with cases in which rights in property taken in violation of international law are in issue.

Collectors lending to museums should also carefully consider the loan agreement with the museum. Although art loans raise legal concerns that touch on a variety of issues, the forms provided by the borrowing museum are often quite short and inadequate for purposes of the lender. To maximise protection, lenders should not hesitate to negotiate and add any terms reasonably necessary to protect their interests to the loan agreement. A few key areas to focus on include the following.

aTitle: the loan agreement should make clear that the borrower does not have a right to sell or transfer title of the artwork.

bInsurance: the loan agreement should describe the insurance coverage for the artwork, including the work’s insurance value. International loan agreements should also take

6022 U.S.C. Section 2459.

61See 23 U.S.C. §§ 1602, et seq.

6228 U.S.C. § 1605(a)(3).

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into account whether any government insurance will be provided. In the US, if the exhibition is insured through the Arts and Artifacts Indemnity Act of 1975, the US government will pay insurance claims in addition to the insurance coverage provided by the borrowing museum. This insurance applies to artworks loaned to US exhibitions, where the artworks are of educational, cultural or scientific value, and are certified by the Secretary of State as being in the national interest.

cTaxes: for international loans, the loan agreement should take into account any tax considerations that are specific to the host country. For example, in the US, the Internal Revenue Code, Section 2105(c), provides that artworks loaned to a public gallery or museum in the US will not be subject to estate taxes if such works remain on loan at the time of the owner’s death, as long as the owner is a non-resident who is not a US citizen.

dCopyright: the loan agreement may need to include copyright provisions. If the borrowing institution plans to photograph the artwork for publicity materials or commercial purposes, and the artwork is under an existing copyright, the borrower will have to obtain permission from both the owner and the copyright holder.

eForce majeure: the loan agreement should address the lender’s concerns about circumstances beyond the parties’ control, including war, natural disaster and political unrest. Many loan agreements excuse performance of certain provisions where events of this kind make performance of the contract dangerous.

fTerm: the agreement should specify a term; this may help to avoid problems that would arise if the lender relocates or loses contact with the museum.

For every loan, there is a cost-benefit analysis that must be made. It is up to the lenders and borrowers to assess the risk and, if they decide to go forward with the loan, to ensure that steps are taken to maximise the safety and security of the artwork. This is even more important during the coronavirus pandemic where museums are closed and thus empty of patrons not only at night but during the day. Lenders should make sure that proper security measures are in place during this time.

iii Cross-border transactions

Countries whose borders encompass the rich culture of ancient lands have struggled for decades to prevent the unauthorised excavation and smuggling of their cultural artefacts, and to attempt to reclaim them after they are discovered in the possession of museums, auction houses, galleries and collectors. The United States is the top importer of art in the world and thus, although they may arguably be insufficient, it has laws in place to combat this issue.

Underlying any claim for the recovery of antiquities in the US is a single, fundamental rule: under US law, no one, not even a good-faith purchaser, may obtain good title to stolen property. When US law is applicable, a true owner always has the right to reclaim stolen property, unless barred by the statute of limitations or other technical defences. To exercise this right, a plaintiff must first establish that it owns the property in question.

First, the foreign government claimant must prove that the object in the defendant’s hands is, in fact, the stolen item. A foreign government plaintiff must also demonstrate that at the time the objects were discovered in and removed from its territory, there were laws in place that clearly vested the government with ownership rights, or some other proprietary interest, in the objects. Virtually all ‘art-rich’ countries have enacted laws, mostly in the early twentieth century, declaring that anything found in or under the ground, even if not yet

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discovered, is owned by the government. These laws, called ‘patrimony laws’, are usually the key to establishing the foreign government’s ownership. Export laws are considered part of a country’s internal policing regulations, and generally are not enforced by the courts of other countries. Only foreign laws clearly establishing that the government owns everything found in or under the ground will be applied in US courts.

To avoid this distinction, however, several countries have entered into special bilateral agreements with the US government pursuant to the Cultural Property Implementation Act of 1983,63 which implements the international Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property.64 Pursuant to these agreements, the US agrees to enforce the export laws of these countries, and will therefore seize and return items brought into the US from these countries without an export permit, even without requiring proof that the government owns those items pursuant to patrimony laws. Twenty countries currently have such agreements with the US: Algeria, Belize, Bolivia, Bulgaria, Cambodia, Chile, China, Colombia, Cyprus, Ecuador, Egypt, El Salvador, Greece, Guatemala, Honduras, Italy, Jordan, Libya, Mali and Peru.65 The US State Department has also recently announced it is considering requests for import restrictions from Nigeria.66

The NSPA criminalises, among other activities, the knowing transfer or transport in interstate or international commerce of stolen property, or possession of stolen property thus transferred or transported. Property proven to have been so transferred, transported or possessed may be seized and the individual violating the NSPA may be prosecuted. The NSPA also serves the basis for civil forfeiture actions that permit the US government to bring a civil in rem action to have property that is the subject of criminal conduct forfeited to the US.67

US import laws also give US Immigration and Customs Enforcement and US Customs and Border Protection authority to seize cultural property and art that are stolen or otherwise brought into the United States illegally, and the persons involved in such violations may be subject to civil and criminal penalties.

iv Art finance

US private banks will make loans to their clients and receive fine art as collateral. In general, banks are reluctant to require these clients to relinquish possession of their art collections. Lenders will only finance a percentage of the appraised fair market value of the artwork, typically 40 per cent to 60 per cent. They will also typically require proof of ownership from potential borrowers. There are also specialist art lenders, boutique lenders and auction houses that provide this service. A lender can perfect a security interest by filing a UCC financing statement that puts others on notice that there is a lien on the artwork and be just as protected from other creditors’ claims as it would be had it perfected by taking possession.

Deloitte estimates that in 2019, between US$21 billion and US$24 billion in loans was outstanding against art globally, with the majority held by the US Bank of America. Private

63Convention on Cultural Property Implementation Act, 19 U.S.C. §§ 2601–2613.

64Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, 14 November 1970, 823 U.N.T.S. 231.

65See https://eca.state.gov/cultural-heritage-center/cultural-property-advisory-committee/current-import- restrictions.

66See https://eca.state.gov/highlight/cultural-property-advisory-committee-meeting-october-27-29-2020.

67See Section III.ii.

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